The Cook Islands Trust Agreement

The trust agreement—referred to in Cook Islands practice as the trust deed—is the governing document of a Cook Islands trust. It defines the parties, establishes the trustee’s powers and obligations, identifies who can benefit from the trust, and sets the rules under which the trust operates for its entire existence. Every other document in the trust structure, from the letter of wishes to the LLC operating agreement, derives its authority from what the trust deed says.

A Cook Islands trust deed is not a form document. While trustee companies maintain templates that reflect standard Cook Islands practice, the deed is negotiated and customized for each client. The provisions it contains determine how the trust responds to litigation, how distributions are made, who controls the trust when circumstances change, and whether the structure holds together under pressure. Poor drafting at this stage creates problems that surface years later, usually at the worst possible moment.

What a Cook Islands Trust Deed Is

A trust deed is a written agreement between the settlor (the person creating the trust) and the trustee (the licensed Cook Islands trust company that will hold and manage the trust assets). It is executed by both parties, typically with signatures witnessed and notarized, and then registered with the Cook Islands High Court Registry. The trust deed itself is not a public document. The Cook Islands maintains strict confidentiality around trust deeds, and Section 14 of the International Trusts Act 1984 makes it a criminal offense to disclose trust information to unauthorized parties.

The deed creates an irrevocable trust governed by Cook Islands law. Unlike a U.S. revocable trust, a Cook Islands asset protection trust cannot be unilaterally revoked by the settlor once executed. This irrevocability is central to the structure’s asset protection function. If the settlor could simply revoke the trust and reclaim the assets, a U.S. court could order exactly that, and the entire protective framework would collapse.

Section 7 of the International Trusts Act permits trust deeds to be executed by the settlor and trustee in different locations and at different times. The deed does not need to be signed in the Cook Islands. In practice, the settlor typically signs in the United States while the trustee signs in Rarotonga, with counterparts exchanged electronically.

Core Provisions of the Trust Deed

Every Cook Islands trust deed addresses several foundational elements. The specific language varies between trustee companies and drafting attorneys, but certain provisions appear in every properly drafted asset protection trust.

Identification of Parties and Governing Law

The opening recitals of the deed identify the settlor, the trustee, and the initial trust property (typically a nominal sum of $10 or $100 that formally creates the trust before larger asset transfers occur). The deed declares that the trust is governed by the laws of the Cook Islands and that the Cook Islands courts have exclusive jurisdiction over disputes arising under the trust. This choice-of-law provision is not merely procedural. Under Section 13G of the International Trusts Act, Cook Islands law governs the validity and administration of a Cook Islands trust regardless of what law a foreign court might prefer to apply. The choice-of-law clause in the deed reinforces this statutory default and eliminates any ambiguity about which legal system controls the trust’s operation.

Beneficiary Designations

The deed identifies the trust’s beneficiaries. In most Cook Islands asset protection trusts, the settlor is named as a beneficiary along with family members, typically a spouse and children. The beneficiary class can be defined broadly to include future descendants or narrowly to name specific individuals.

The deed also establishes what type of beneficial interest each person holds. In virtually all asset protection trusts, these interests are discretionary. That means no beneficiary—including the settlor—has an automatic right to any distribution. Instead, the trustee decides when and whether to distribute, based on the terms of the deed, the letter of wishes, and the trustee’s own judgment. This discretionary structure is important for asset protection because a creditor generally cannot seize an interest that the beneficiary does not yet have a right to receive.

Some deeds define different classes of beneficiaries (primary, secondary, and default) with the trustee directed to consider each class in order. Others use a single discretionary class with guidance provided through a separate letter of wishes. The choice between these approaches depends on the settlor’s family situation and goals.

Trustee Powers

The trust deed grants the trustee specific powers over trust assets. In a Cook Islands trust, these powers are typically broad. They generally include the authority to hold, invest, manage, sell, and distribute trust property in the trustee’s discretion. The deed may also grant the trustee power to borrow against trust assets, form subsidiary entities (such as a Cook Islands LLC), open and close bank and brokerage accounts, retain professional advisors, and settle or defend legal claims on behalf of the trust.

The breadth of trustee powers serves an asset protection function. A trustee with narrowly defined powers may lack authority to respond to a litigation threat. It may be unable to move assets between accounts, restructure ownership through a new entity, or engaging local counsel to oppose a foreign proceeding. Drafting the powers section too restrictively can limit the trustee’s ability to protect the trust when it matters most.

At the same time, the trustee’s powers are fiduciary. The trustee cannot use them for personal benefit and must exercise them consistently with the terms of the deed and the interests of the beneficiaries. Cook Islands law imposes these obligations regardless of what the deed says, but a well-drafted deed reinforces them explicitly.

Settlor’s Reserved Powers

Cook Islands law, unlike many trust jurisdictions, permits the settlor to retain certain powers without invalidating the trust or compromising its asset protection characteristics. Section 13C of the International Trusts Act states that an international trust is not invalid and a settlor’s interest is not subject to creditor claims merely because the settlor retains powers of disposition, retains a beneficial interest, or serves as a protector.

In practice, this means the deed can reserve to the settlor powers such as the ability to add or remove beneficiaries, to direct or veto certain investment decisions, or to appoint and remove the protector. The extent of reserved powers varies by client and by how the drafting attorney assesses the balance between control and protection. Retaining too many powers can create practical problems even if Cook Islands law permits them, because U.S. courts evaluating contempt or repatriation may view extensive reserved powers as evidence that the settlor retains effective control over the assets.

The best-drafted deeds resolve this tension by reserving powers that the settlor needs for normal operation while ensuring that the powers automatically fall away or transfer to the protector or trustee upon a defined triggering event, such as the commencement of litigation.

Protective Provisions

The provisions that distinguish a Cook Islands trust deed from an ordinary trust instrument are those designed to function under litigation pressure. These clauses are not boilerplate. How they are drafted determines whether the trust performs as intended when a creditor attempts enforcement.

The Duress Clause

The duress clause (sometimes called an anti-duress provision) instructs the trustee to disregard any direction from the settlor, protector, or any other person that is given under compulsion from a court or other authority. The clause defines specific triggering events—typically the issuance of a court order, the filing of a lawsuit, the entry of a judgment, or the commencement of bankruptcy proceedings, and directs the trustee to treat any instruction given after such an event as having been made under duress.

The practical effect is that if a U.S. court orders the settlor to direct the trustee to repatriate trust assets, the trustee is contractually and legally required to refuse. The settlor can then honestly represent to the court that compliance is beyond the settlor’s power, because the trust deed prohibits the trustee from following compelled instructions.

The duress clause has been tested in litigation. In FTC v. Affordable Media (the “Anderson case”), the Andersons’ Cook Islands trust included a duress clause that operated to freeze distributions when a U.S. court issued a repatriation order. While the Ninth Circuit ultimately found other grounds for contempt—specifically that the Andersons retained too much control through their roles as co-trustees and protectors, a structural error in the trust’s design, the duress clause itself functioned as intended. The case illustrates both the clause’s protective value and the importance of ensuring the broader trust structure supports it. A duress clause in a trust where the settlor serves as co-trustee or protector creates an internal contradiction that courts will exploit.

The Anderson case is discussed in greater detail in our analysis of Cook Islands trust case law.

The Flight Clause

A flight clause (also called a migration or re-domiciliation clause) authorizes the trustee or protector to transfer the trust’s governing law and administration to another jurisdiction if continuing in the Cook Islands becomes impractical or if certain triggering events occur. The clause typically permits re-domiciliation to a pre-approved list of alternative jurisdictions, such as Nevis or Belize, without requiring settlor involvement.

The flight clause serves as a contingency. If the Cook Islands were to change its trust legislation in a way that weakened asset protection, or if political or economic conditions made administration impractical, the trustee could relocate the trust rather than continue operating under adverse conditions. In practice, flight clauses are rarely exercised. The Cook Islands’ legislative environment has been stable since the International Trusts Act was first enacted in 1984 and strengthened through amendments in 1989, 1995, and 1999. But the clause’s presence adds a structural layer of protection that strengthens the trust’s long-term resilience.

The Spendthrift Clause

A spendthrift clause prohibits beneficiaries from assigning, pledging, or otherwise transferring their beneficial interests in the trust, and prevents creditors from attaching or garnishing those interests. Under Cook Islands law, this clause is given full effect. Section 13F of the International Trusts Act provides that a beneficiary’s interest in an international trust cannot be seized, attached, or otherwise taken in satisfaction of the beneficiary’s obligations.

The spendthrift provision works in conjunction with the discretionary distribution structure. Because the beneficiary has no fixed entitlement to distributions (they are discretionary) and cannot transfer whatever contingent interest they do hold (the spendthrift clause prevents it), a creditor has no mechanism to reach trust assets through the beneficiary’s interest.

Choice of Law and Forum Selection

As noted above, the deed specifies that Cook Islands law governs the trust and that Cook Islands courts have exclusive jurisdiction. These provisions are reinforced by Section 13G of the International Trusts Act, which directs that Cook Islands law applies to questions about the trust’s validity, construction, and administration regardless of the law of any other jurisdiction. Section 13D provides that foreign judgments are not enforceable against Cook Islands trusts.

The practical effect of these provisions is that a creditor cannot simply present a U.S. judgment to a Cook Islands court and expect enforcement. The creditor must instead commence a new proceeding in the Cook Islands, subject to Cook Islands law, including the two-year limitation period, the beyond-reasonable-doubt burden of proof, and the requirement that the creditor demonstrate the specific transfer to the trust was fraudulent as to that particular creditor.

Administrative Provisions

Beyond the protective clauses, the deed contains provisions governing the trust’s day-to-day and long-term administration.

Trustee Succession and Removal

The deed establishes how the trustee can be replaced. Typically, the protector holds the power to remove the trustee and appoint a successor, subject to the requirement that any successor trustee be a licensed Cook Islands trust company. The deed may also address situations where the trustee becomes incapacitated, loses its license, or is placed into receivership. A well-drafted succession provision ensures the trust continues to function even if the original trustee ceases to operate.

Trust Duration

Cook Islands law permits perpetual trusts. Section 6 of the International Trusts Act allows an international trust to continue indefinitely unless the deed specifies a shorter term. Most asset protection trusts are drafted as perpetual trusts, providing multi-generational flexibility. The deed may also include provisions allowing the trustee or protector to terminate the trust and distribute its assets if continuation no longer serves the beneficiaries’ interests.

Accounting and Reporting

The deed typically requires the trustee to maintain accurate accounts of all trust assets, transactions, and distributions, and to make those records available to the protector or beneficiaries on request. These provisions support U.S. tax compliance by ensuring the settlor has access to the information needed to file Forms 3520, 3520-A, FBAR, and Form 8938. The deed’s accounting provisions should be specific enough to create an enforceable obligation on the trustee, not merely a general statement that records will be kept.

Investment Direction

The deed may grant the trustee full investment discretion or may appoint an advisory trustee or investment advisor with authority to direct investment decisions. Under Section 17 of the International Trusts Act, a trustee is excused from liability for losses arising from investments made on the advice of an advisory trustee. This provision allows settlors who wish to maintain influence over investment strategy to do so through a formal role recognized by Cook Islands law, rather than through informal arrangements that could be characterized as retained control.

What the Trust Deed Does Not Contain

Understanding what belongs in the deed is as important as understanding what does not. Certain information is deliberately excluded from the trust deed and placed in separate documents.

The letter of wishes is a private communication from the settlor to the trustee expressing the settlor’s preferences about distributions, investment philosophy, and the treatment of specific beneficiaries. It is not legally binding, which is precisely the point. Because the letter of wishes is guidance rather than a mandate, it preserves the trustee’s discretion while giving the trustee context for how the settlor would like the trust administered. Including these preferences directly in the trust deed would convert them into binding obligations and could limit the trustee’s discretion in ways that weaken asset protection.

The affidavit of solvency is a sworn statement by the settlor confirming that the transfer of assets to the trust will not render the settlor insolvent. This affidavit is required by Cook Islands trustee companies as part of their due diligence process and serves as evidence that the trust was not funded with the intent to defraud specific known creditors. It is a separate document, not a provision of the trust deed itself.

Banking resolutions, account opening documents, and LLC formation documents are also separate from the trust deed but derive their authority from it. The deed authorizes the trustee to open accounts and form entities; the individual documents implement those authorizations.

How Drafting Quality Affects Protection

The trust deed is the document that a Cook Islands court will interpret if the trust is ever challenged. Every provision in the deed either strengthens or weakens the trust’s position under litigation. Ambiguous language about the scope of the trustee’s powers can create uncertainty about whether the trustee has authority to resist a repatriation demand. A poorly drafted duress clause with undefined triggering events may not operate when needed. Reserved powers that are too broad may give a U.S. court grounds to conclude the settlor retains effective control, undermining the impossibility defense.

Drafting a Cook Islands trust deed requires familiarity with both Cook Islands statutory law and the practical realities of how U.S. courts have treated offshore trusts in contempt and fraudulent transfer proceedings. The Anderson case, the Lawrence case, and subsequent proceedings have created a body of judicial reasoning that directly informs how provisions should be structured. An attorney drafting a Cook Islands trust deed without knowledge of this litigation history is operating without essential context.

The trust deed is also the document that the trustee company reviews most carefully during the onboarding and acceptance process. Trustee companies routinely request revisions to draft deeds that contain provisions inconsistent with their operational practices or that create compliance concerns under Cook Islands regulatory requirements. This collaborative drafting process between U.S. counsel, the settlor, and the trustee is a normal and productive part of trust formation—not a sign of a problem.

For a broader overview of what occurs during the trust creation process, including the role of the deed within the overall timeline, see the setup and application process. For information about the due diligence the trustee performs before accepting a new trust, see our explanation of KYC and AML requirements. For a comprehensive overview of Cook Islands trust planning, return to the Cook Islands trust overview.